IRS Proposes Lowering Tax Threshold on Gambling
HandelontheLaw.com Staff Writer
The Internal Revenue Service (IRS) has proposed lowering the income tax threshold for gambling winnings from $1,200 to a puny $600! Along with the new proposal, the IRS also suggests that player loyalty cards issued by casinos would be used to keep track of play and a player would have to win at least 1 jackpot of at least $1,200 and still have won at least $1,200 accounting for all losses and wins during a play session. A “session” would be the time from the player’s first bet to his/her last in a single calendar day.
As the tax law stands, people winning a single jackpot or win of at least $1,200 must report and pay income tax on that win. In the case of Keno, the threshold win is $1,500. As I understand the situation, if you’re lucky enough to win at least the threshold sum, you can subtract your losses on Schedule A from your W-2G winnings on your 1040, though the winnings are used to calculate whether you owe alternative minimum tax, regardless of losses.
As to the first proposal about lower the income tax threshold from $1,200 to $600, that appears to be exactly the opposite of the correct approach. Those threshold sums were set in 1977. Adjusting for inflation, a $1,200 jackpot in 1977 has the buying power of $4,685.13 in 2015; consequently, the IRS should adjust UPWARD, raising the jackpot threshold before reporting and income tax are required.
As to the second proposal, calling for the careful monitoring of loyalty cards and the monetary requirements for reporting, this would be fairer than the current system because they’re at least keeping more accurate track of all your losses before socking you with income tax. However, there are drawbacks: the amounts should be raised to at least $4,685.13 (make that at least $5,000, since the threshold might not change for another 38 years); that creates a lot more administrative work and expense for casinos (not that my heart bleeds for them); and many players will not want the IRS keeping such careful track of their gambling, which could kill the loyalty card system.
The IRS called for comments and quickly received thousands of comments, mostly critical of the proposals in particular and the IRS in general. Senator Dean Heller (R-Nevada) registered his displeasure with the proposals during a hearing with the IRS Director
A public hearing on these proposals will be held in Washington, DC on June 17, 2015.
By Kathy Catanzarite
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